Inference for High-Dimensional Local Projection

Speaker: Prof Bin Peng

Affiliation: Monash University

Location: Room 207, Chamberlain Building (#35), St Lucia Campus

Abstract: This paper rigorously analyzes the properties of the local projection (LP) methodology within a high-dimensional (HD) framework, with a central focus on achieving robust longhorizon inference. We integrate a general dependence structure into h-step ahead forecasting models via a flexible specification of the residual terms. Additionally, we study the corresponding HD covariance matrix estimation, explicitly addressing the complexity arising from the long-horizon setting. Extensive Monte Carlo simulations are conducted to substantiate the derived theoretical findings. In the empirical study, we utilize the proposed HD LP framework to study the impact of business news attention on U.S. industry-level stock volatility.